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Fewer cops, more potholes: How debt deal could hit states hardest

Federal spending cuts mean fewer dollars will flow to the states for unemployment benefits, education, health care, and other state-run programs. Many states will have to cut services or raise taxes.

By Patrick WallContributor / August 2, 2011

Alan Marshall, of Waterbury, Conn. will lose his position with the Southbury Training School Fire Department, he told reporters on Aug. 2. The training school is losing eight of 13 firefighter/EMT positions. With states losing hundreds of millions of federal dollars, Connecticut and other states must make hard choices about what jobs and services to cut and how much to raise taxes.

Steven Valenti / The Republican-American / AP

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The debt-and-deficit bill signed into law on Tuesday forestalled a dangerous federal government default. But it will also slash aid to states already reeling from the recession, almost certainly forcing them to curtail services and raise revenues to pay for programs once bankrolled by Congress.

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The bill, which the Senate approved and President Obama signed into law Tuesday, will eventually raise the government’s debt limit by more than $2 trillion in exchange for equivalent savings. Congress will achieve nearly $1 trillion of those savings by cutting domestic discretionary spending – including funds for education, health care, job training – to its lowest level in over half a century, as a share of the GDP.

“State budgets are already devastated,” says Ethan Pollack, a senior policy analyst at the Economic Policy Institute. “This deal just makes it far worse and shifts a lot of the pain onto state and local governments.”

The recession pummeled states, diminishing tax revenues while increasing demand for public aid. Federal stimulus dollars that shored up many state budgets over the last few years are mostly spent, as are many states’ rainy day funds.

When state lawmakers hashed out budgets for the fiscal year that began in July, 42 states and the District of Columbia faced a collective budget gap of $103 billion, according to the Center on Budget and Policy Priorities (CBPP), which tracks state spending. Because every state except Vermont requires a balanced budget, almost all were compelled to slash services, raise taxes, or both.

The law passed Tuesday will shrink the government’s non-security, domestic, discretionary spending by about $500 billion over the next 10 years, according to the CBPP. Nearly a third of those funds typically flow to states.

States rely on federal aid to pay for many popular programs, including Head Start, work study, energy and housing subsidies, highway repair, and emergency response. With fewer federal dollars available, states will need to restrict their own resources to vital institutions, while cutting or charging fees for less-crucial services.

Taxpayers can expect larger class sizes, fewer police officers, and more potholes, says Jo Comerford, executive director of the National Priorities Project, a left-leaning non-profit that monitors government spending.

“We’re way past cutting the fat or program efficiencies,” says Ms. Comerford. “Now we’re into cuts that are really affecting quality of life and forcing really hard choices.”

States’ painful budget decisions are likely to extend beyond fees and service cuts.

Since August 2008, state and local governments have trimmed workforces at a rate of about 10,000 to 20,000 positions per month, according to the CBPP. Reduced federal aid will likely mean more state-level job and benefits cuts, which in turn could slow states’ recoveries.

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